Since its launch 5 years ago auto-enrolment has dramatically altered the face of workplace pensions and has managed to successfully change the public perception of saving. Before the introduction of auto enrolment, just 55% of UK employees were actively saving into a workplace pension. By March 2016, this figure had rose to 78%.
This needed to happen – with average life expectancy increasing, the UK government was concerned that people are not saving enough for an adequate retirement and wanted to ensure that individuals had the best possible income and support when they reach their retirement.
Under the Pensions Act 2008, every employer must enrol all eligible employees into a qualifying workplace pension and make contributions. This applies to workers who are aged at least 22 but under state pension age, usually working in the UK and earning more than £10,000 per year, unless they’re already a member of a pension scheme that meets certain criteria set out in law.
With auto enrolment, there is a minimum total amount that has to be contributed to a pension scheme by both the employee and the employer. This total minimum contribution is currently set at 2% of your earnings (0.8% from you, 1% from your employer, and 0.2% as tax relief).
From 6th April 2018, the total minimum contribution will rise to 5% with a 2% minimum employer contribution and the employee contributing the remaining 3%. Minimum contributions will undergo further increases on 6th April 2019, with the total minimum contribution rate increasing to 8% (3% employer, 5% employee). If an employer chooses to pay more than the employer minimum but less than the total minimum amount, then the employee must make up the difference.
Both the employer and staff member can choose to contribute greater amounts to the pension if they wish.
Auto enrolment has been very successful to date, with less than 10% of people choosing to opt out. However, there is a concern that opt out rates will rise when employees are asked to put more into their workplace pension.
The table below demonstrates the phases of contribution increases under new auto enrolment rate changes, with the employer paying only their minimum, and the staff contribution shown in brackets (the difference between the total minimum and the employer minimum).
Unlike our competitors, our entire workforce is employed by us, this increases loyalty to the brands we work for and the stores we work in. A very small number of our employees opted out of the work based pensions scheme, meaning our workforce is ready for the future.